The pink paper that grew more valuable in the digital maelstrom
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In the end, it came down to money. After Pearson had chosen the news organisations it believed could become responsible owners of the Financial Times, and quizzed them about their respect for editorial integrity, the outcome turned on whether Axel Springer of Germany or Nikkei of Japan would pay more. It turned out, in a last-minute drama on Thursday afternoon, to be Nikkei.
Amid shock that Pearson’s 58-year ownership of the FT is coming to an end, and pointed questions about how Nikkei will treat its new asset, the £844m price tag drew some gasps.
The news business has been in disarray for a decade, with older brands falling and digital ones rising. Yet the price fetched by the FT, which was founded in 1888, was as racy as an internet start-up.
This says a lot not only about the FT itself but also the maelstrom around it in the news publishing world. The value of an English-language, business-focused, high-quality, still-expanding publication that attracts professional readers has steadily increased. Magazines may crumble, metropolitan papers may tumble, but global business news and comment is here to stay.
The FT last changed hands in 1957, when Pearson, then owned by the Cowdray family, paid £720,000 for a controlling stake in a deal valuing the City of London paper at the inflation-adjusted equivalent of £60m.
The FT was smaller then, and the internet was decades away from being invented, but it was growing — its 84,000 circulation had risen 40 per cent in eight years.
Nikkei this week paid 14 times that price for an FT that has 737,000 print and digital subscribers, yet makes only about twice 1957’s inflation-adjusted profits. As Ken Doctor, the US analyst, wrote: “That multiple puts the FT in a class by itself — as perhaps it should be.” It is five times what Jeff Bezos, Amazon’s founder, paid for the Washington Post in 2013, and one-and-a-half times BuzzFeed’s valuation last year.
It seems odd to compare the Financial Times to BuzzFeed, the innovative US news and entertainment site valued by venture capitalists as much for its traffic growth and profit potential as for its current revenues. Yet the FT and BuzzFeed share some coveted qualities in today’s news business — they are global, they have room to grow and English is their first language.
It is notable that, despite speculation that the FT could be acquired by Bloomberg or Thomson Reuters, the world’s biggest financial information groups, the final bidders left in the auction were foreign language publishers. Both saw in the FT a flagship for global expansion, escaping the circulation limits imposed on them by their mother tongues to what has become the language of global business.
The FT also has trophy value. Like a house for sale on the smartest street in a city, there are not many of them and they do not come up for purchase often. The two papers with comparable reach among global professionals are The Wall Street Journal, bought for $5bn by Rupert Murdoch’s News Corp in 2007, and The New York Times, still controlled by the Sulzberger family.
The price amounts to a belated vindication of the strategy pioneered by Gordon Newton, the FT’s editor between 1950 and 1972, of breaking out of the FT’s original niche of being a bible for brokers and bankers in the City of London. Sir Gordon expanded briskly into industrial, political and arts coverage. Under him and later editors, the FT then broadened its focus from the UK to Europe, the US and Asia.
This was partly foresight, and partly being in the right place. The postwar City was a hub for British companies to raise funds, but lacked the global reach of its 19th-century heyday, when banks such as Barings and Rothschild (which advised Nikkei on its FT purchase) financed the world. As the City deregulated, and finance and industry globalised from the 1980s onwards, the FT was carried along with it.
Its global expansion, derided in the past by Fleet Street rivals, is now being followed in the digital world. The Guardian, which moved headquarters from Manchester to London in the 1960s, has expanded to the US and Australia. Having decided not to charge online for its general news and analysis, it finds the UK’s 64m population too small to support it financially.
The problem for such publishers, which rely heavily on advertising, is that yields have fallen as news outlets, social media brands and entertainment sites compete for the same marketing budgets. Business publications also need to grow online, but the FT and others have the crucial advantage that many readers will subscribe to gain access to valuable financial information.
It could all go wrong, of course. If the FT falters, or its digital transition does not bring in enough revenue, history may judge that Pearson sold at the right moment. Business news is attracting competition from companies with deep pockets, technology expertise and huge ambition. Bloomberg has built a 2,300 -journalist news operation on the back of its data business in 25 years.
But the price paid by Nikkei has one lesson — those who conceived and produced the FT’s growth in six decades within Pearson got some important things right. The FT now needs to prove itself again within Nikkei.
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